Budget breakdown for Wisconsin’s emerging economy
The return of the Wisconsin Legislature and the unveiling of the latest state budget plan have come with a mix of proposals tied to the state’s knowledge economy. Here’s a quick rundown of the plusses and minuses so far:
Broadband development: Gov. Scott Walker’s budget bill contains about $40 million to speed deployment of broadband technology in hard-to-serve places across Wisconsin, mostly in rural areas. This would likely accelerate the rollout of federal “Connect America Fund 2” grants, beginning this year and running through 2020.
Access to high-speed internet connections is critical for Wisconsin, especially in those areas that could lag in terms of economic growth, education, health care, and more without it.
Investor tax credits: The budget would remove a longstanding cap on how much money a young company could raise before its investors no longer qualify for the state’s investor tax-credit program.
The cap has stood at $8 million for about a decade. Meanwhile, the financing needs of young companies — especially those in capital-intensive or regulated industries — have changed. Raising the lifetime cap to $12 million for any one company wouldn’t deplete the existing 25% credit pool and would enhance the growth of companies that create good-paying jobs.
Fetal tissue: Once again, bills are circulating in the Capitol to ban research on aborted fetal tissue in Wisconsin. One bill would essentially duplicate existing federal law and thus wouldn’t change existing practices in Wisconsin, where small amounts of fetal tissue, cells, or amniotic fluid are used for research on birth defects and more.
Other proposals would impose new limits, however, and send a chilling message about research in Wisconsin. That could be dangerous in a competitive environment in which other research-heavy states don’t go beyond federal law.
Foreign C corps: The budget does not change one of the anomalies of Wisconsin law, which is a tax on capital raised by C corporations that are classified as “foreign corporations.” Foreign doesn’t mean China, France, or Singapore in this case. It means Delaware, North Dakota, or a few other states where Wisconsin companies often are legally domiciled, even if those companies have their buildings, people, and operations in Wisconsin.
Current law means foreign C corporations that raise venture capital are subject to a fee, even if those companies are pre-revenue. It’s an impediment to attracting outside capital.
Occupational licenses: Many elements make up a thriving entrepreneurial economy. Among them are cultures that reward risk and don’t penalize honest failure; workers who are diverse in terms of skills and training; clusters of innovation in cities or universities; and access to capital.
Just as high on the list is a regulatory climate that encourages the free flow of talent and that lowers barriers to entry into the startup economy.
Nearly a third of all American workers are required to hold a government-issued license to do their jobs, up from less than 10% in the 1960s. Wisconsin is no exception to the rule. The Wisconsin Institute for Law and Liberty recently noted a 34% increase over 20 years in the number of credential holders regulated by the state Department of Safety and Professional Services and an 84% jump over the same time period in the number of license types regulated by that agency.
A proposal by Walker to create commissions to scrutinize proposed and existing occupational licenses is a welcome step toward lowering those hurdles for thousands of workers in Wisconsin. It’s an idea with support from groups as diverse as the Ewing Marion Kauffman Foundation to the Progressive Policy Institute.
State business loan program: The Wisconsin Economic Development Corp. was criticized by lawmakers from both parties for failing to monitor its business loans, especially those made largely in its first two years of existence. That program went away for a while as WEDC retooled its processes. Walker’s budget would reinstate the loan program with safeguards, which makes sense from a competitive perspective.
Almost all states have some sort of a business loan program. It is most often used to assist younger, homegrown companies, although sometimes to attract larger firms looking to expand. Unless lawmakers think WEDC will somehow repeat the mistakes of the past, this proposal makes sense.
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